What do HMRC mean by the term ‘Competent Professional’?
What is a competent professional?
In overview terms, HMRC define compliant R&D for tax purposes as;
‘the seeking of an advancement in science or technology by overcoming scientific or technological uncertainty which is neither publicly available nor readily deducible by a competent professional working in the field’
The term ‘competent professional’ is not defined further within the legislation itself as the term itself is considered to be ‘self-explanatory and therefore takes on a more generic meaning as outlined in CIRD81300.
What attributes should a competent professional be able to demonstrate?
The individual deemed by the claimant to be the ‘competent professional’ should be able to demonstrate a sufficient level of skill and knowledge of the field to be able to work in it successfully, therefore, it would be reasonable to expect the competent professional in your business to exhibit the following characteristics;
- Specific sector experience which gives him/her the knowledge of the baseline regarding the scientific and technological principles in the field at the time the activities were undertaken.
- A track record of achievement within the field which supports their competence.
- An up-to-date awareness of the scientific and technological aspects of the field in which they operate, in the same way that professional bodies actively encourage the deployment of CPD initiatives.
- An ability to explain and convey details of any developments (which may be highly technical in reality) in a simple and concise manner which is easily understood by a layperson.
The benchmark is therefore not necessarily the view of an ‘expert’ or a ‘leader’ and, for this reason, it’s important to recognize that the Managing Director, CEO and suchlike is often NOT the competent professional, despite their protestations, especially in larger SME’s.
What is the role of the competent professional?
The identified competent professionals role is especially important to any business’s assessing compliant activities for R&D Tax Credits purposes, as the ‘competent professional’ is usually the best placed individual to assess whether a project qualifies based on their knowledge, skill, academic background and experience of whether the activity was an advancement in the field of science and technology, or simply a routine fix, (which would not count as R&D).
What are the risks in not involving a competent professional?
Using an underqualified or inexperienced competent professional leaves you open to:
- Wrongly assessing claim eligibility.
- Missing or misidentifying qualifying project activity and or expenditures.
- Not maximising the £ claim benefit you are entitled to.
- Submitting a weak technical report that does not tick all HMRC’s required boxes.
And In the case of an HMRC enquiry, It will be significantly harder to successfully defend your R&D claim as their lack of knowledge will be clearly evidenced by HMRC, ultimately, impacting the success of your claim.
So whether its maximising your claim by identifying more qualifying activities and expenditures, to improving the likelihood of claim acceptance by HMRC through a strong technical narrative, a competent professional is integral to the success of your R&D claim.
Competent professionals provide the required level of technical assurance and robustness to your claim.
At Innovation Tax, we firmly believe that early identification of the competent professional is of vital importance in providing the required level of assurance and robustness to the technical compliance of a claim. Technical R&D reports we prepare on behalf of our clients include a profile on the Competent Professional outlining the following summary points:
- Employment and academic history including tenure at claimant company.
- Technical experience and skills in relation to the development being undertaken.
This helps put into perspective the role they play as the ‘competent professional’, aside from their more obvious day-to-day commercial activities based upon the position held. To view HMRC’s guidance, click here.
HOW CAN WE HELP?
It can be challenging to submit an R&D Tax Credit claim to HMRC’s exact standards.
At Innovation Tax, our team of experienced sector specialists, technical and quality assurance experts and tax professionals will help you identify the full extent of your qualifying activities and expenditure and work with you to ensure the correct information is included in the claim documentation, giving you peace of mind that your claim is robust, maximised and defendable.